GDP growth among Norway’s trading partners slowed from 2012 Q1 to Q2. Growth was 0.1% in Q1, as expected in the June 2012 Monetary Policy Report. Macroeco-nomic indicators continued to fall into Q3, but have shown signs of improving recently (see Charts 2.1 and 2.2). Short-term indicators point to approximately zero growth again in Q3. However, economic developments vary widely among Norway’s main trading partners, with signs of a moderate recovery in, for example, the US and a continued fall in GDP in the euro area. Since June, the announcement of measures to be launched by the Euro-pean Central Bank (ECB) and proposals for a single banking supervisory mechanism in the EU have eased financial market tensions in the euro area. The ECB reduced its key rates in July. Monetary policy easing has also been implemented in a number of other countries.
The central banks in the US, UK and Japan have announced further bond purchases, known as quantitative easing. Key rates have been lowered in Sweden, Australia and several emerging economies. As a result of these measures, there are signs of greater optimism in financial markets and risk premiums have fallen. Uncertainty about developments ahead is nevertheless still unusually high, particularly for the euro area, but also globally.
The unrest linked to the sovereign debt crisis in the euro area has led to a fragmentation of European capital mar-kets. This is reflected in relatively high premiums in banks’ lending rates to households and enterprises, and as a result low key rates have not passed through to bank lending rates to the public in all countries (see Chart 2.3).
In summer, the ECB announced that it would, within its mandate, take the measures necessary to preserve the euro, including unlimited purchases of sovereign bonds from countries agreeing to a full macroeconomic adjust-ment programme or a precautionary programme under the established European borrowing facilities (EFSF/
ESM). The European authorities have also proposed measures for closer integration, including the establish-ment of a single banking supervisory mechanism,
50
World trade (left-hand scale)
Global PMI new export orders (right-hand scale)
Chart 2.2 Growth in world trade and indicator of global exports. World trade:
Three-month moving average. Past three months over previous three months.
Percent. Global PMI export orders: Diffusion index centred around 50. January 2006 – September 2012
30 40
2006 2007 2008 2009 2010 2011 2012
-15
70 US (ISM) Euro area Sweden
China UK
Chart 2.1 Manufacturing PMIs. Diffusion index centred around 50.
January 2006 – October 2012
30 40
30 40
2006 2007 2008 2009 2010 2011 2012
Source: Thomson Reuters
Chart 2.3 Interest rate on new business loans to non-financial corporations.
Loans up to EUR 1m. Maturity between 1 and 5 years. Key policy rate. Monthly figures. Percent. January 2006 - August 2012
0
2006 2007 2008 2009 2010 2011 2012
Spain France Italy
Minimum bid rate, ECB
Source: ECB
increasing the probability that the sovereign debt crisis can be resolved in an orderly manner, in line with the assumptions underlying the projections in this Report.
Further deleveraging in both the private and public sector, a high degree of uncertainty and limited access to credit are nevertheless expected to weigh on growth in the coming years. In 2012, euro-area GDP is expected to fall, but the projection has been revised up somewhat compared with the June Report owing to a slower decline in Q2 than projected earlier. Increased exports and a gradual easing of credit conditions are expected to result in growth of
½% in 2013. For the remainder of the projection period, growth is expected to pick up gradually to 2% in 2015, in line with the June projections (see Table 2.1).
In Sweden, GDP growth has been considerably higher than expected so far in 2012, with particularly strong growth in net exports. The growth forecast for 2012 has therefore been revised up since the June Report. However, developments are expected to be weaker in the latter half of 2012 owing to low growth among trading partners.
Further ahead, expansionary monetary and fiscal policies and higher global demand will contribute to a gradual pickup in the pace of growth. In the UK, growth has been lower than expected. Growth is expected to be weak in Q4, followed by a gradually pickup in 2013. The projec-tion for GDP growth in 2012 and 2013 has been revised down by ¼ percentage point.
In the US, domestic demand has grown moderately and there are signs of improvement in both the housing and labour markets (see Chart 2.4). It is still uncertain whether temporary tax relief and other temporary measures will be extended beyond the turn of the year. If all the measures are allowed to expire as originally planned, fiscal tightening in 2013 could be over 4% of GDP. This would considerably dampen GDP growth in 2013. It is assumed that such an outcome will be avoided, but fiscal policy uncertainty is expected to restrain growth in con-sumption and investment in the near term. The projection for growth in 2012 has nonetheless been revised up some-what, largely owing to revisions of historical GDP growth. From 2013, the elimination of fiscal policy uncer-tainty and a continued expansionary monetary stance are
20
Manufacturing (31% of total) Infrastructure (27% of total) Real estate (24% of total)
Chart 2.5 Fixed asset investment in China. Value. Three-month moving average.
12-month change. Percent. January 2006 - September 2012
-10
2006 2007 2008 2009 2010 2011 2012
Sources: CEIC and Norges Bank
6 Unemployed over 15 weeks
Chart 2.4 US unemployment. Percent of labour force. January 2006 – September 2012
0 2 4
2006 2007 2008 2009 2010 2011 2012
0 2 4
Source: Thomson Reuters
Table 2.1 Projections for GDP growth in other countries.
Change from previous year. Percent. Change from projections in Monetary Policy Report 2/12 in brackets
Share of world
1) Purchasing-power-parity (PPP) GDP in 2010
2) Average annual growth
3) Export weights, 26 main trading partners
4) GDP weights. Norges Bank’s estimates for 26 trading partners, other estimates from IMF
Sources: IMF, Eurostat and Norges Bank
expected to contribute to somewhat higher economic growth.
In China, GDP growth has slowed as a result of weaker global demand and monetary policy tightening in 2010 and 2011. There are nonetheless signs that the housing market is stabilising and the Chinese authorities have announced an increase in infrastructure investment to stimulate the economy (see Chart 2.5). Growth projec-tions for China remain unchanged at an annual rate of 7½%–8%. GDP growth in the other emerging Asian economies slowed more than expected, partly owing to lower export growth through the summer. Domestic demand, however, has remained buoyant. Monetary and fiscal policy easing is expected to support growth ahead.
The projections for GDP growth among Norway’s trading partners are unchanged from the June Report (see Chart 2.6). Owing to a continued need for deleveraging in the private and public sectors in a number of advanced econ-omies, growth is weaker than normal after a downturn.
As the private and public sectors improve their balance sheets and uncertainty diminishes, growth is expected to gradually pick up from ¾% in 2012 to 1¾% in 2013 and to an annual average of 2½% for 2014 and 2015 (see Table 2.1). The growth projection for 2013 is based on the assumption that the unrest in the euro area will not intensify and that fiscal tightening in the US will be broadly in line with 2012.
Overall, consumer price inflation among Norway’s trad-ing partners has fallen since the June Report. Core infla-tion has fallen in both emerging and advanced economies (see Chart 2.7). There have been wide variations across countries. Inflation has been somewhat higher than expected in the US and the euro area and somewhat lower than expected in China. Higher energy prices, higher taxes and rising prices for services have held up inflation despite spare capacity in a number of countries. Weak cost pressures and somewhat lower energy prices will push down inflation in 2013. Overall annual consumer price inflation among trading partners is expected to be about 2% in the projection period (see Table 2.2).
Table 2.2. Projections for consumer prices in other countries (change from previous year, percent) and oil price. Change from projections in Monetary Policy Report 2/12 in brackets
2012 2013 2014–151) Oil price Brent Blend4) 112 105 98
1) Average annual rise
2) Weights from Eurostat (each country’s share of euro area consumption)
3) Import weights, 26 main trading partners
4) Futures prices (average for the past five trading days). USD per barrel.
For 2012, an average of spot prices so far this year and futures prices for the rest of the year is used
Sources: Eurostat, Thomson Reuters and Norges Bank
-1
Chart 2.6 Quarterly GDP growth trading partners. Historical numbers and projections given at different points in time. Percent. 2008 Q1 – 2013 Q2
-3 -2 -3
-2
2008 2009 2010 2011 2012 2013
Projections MPR 1/12 Projections MPR 2/12 Projections MPR 3/12
Sources: Thomson Reuters and Norges Bank
2
Chart 2.7 Consumer prices in advanced economies and emerging markets.¹⁾ 12-month change. Percent. January 2006 – September 2012
2006 2007 2008 2009 2010 2011 2012
-2
1) GDP-weighted (PPP). Advanced economies: Australia, Canada, euro area, Japan, UK and US. Emerging markets: Argentina, Brazil, India, Indonesia, China, Mexico, Russia, South Africa, South Korea and Turkey.
Sources: CEIC, IMF, Thomson Reuters and Norges Bank
Commodity markets
The oil price is around USD 110 per barrel, about 15%
higher than at the time of publication of the June Report.
The projections in this Report are based on the assump-tion that oil prices will track futures prices (see Table 2.2), which now imply an average oil price a little below USD 100 per barrel in 2014–2015. Oil prices rose over summer, particularly owing to the suspension of Iranian oil exports in connection with US and EU sanctions and fears of further unrest in the Middle East. Saudi Arabia has stated that oil production will be increased to bring oil prices down to around USD 100 per barrel. Oil prices may fall well below USD 100 if the global economy weakens more than expected. On the other hand, oil prices may rise again in the event of supply-side disrup-tions, for example, if the situation in Iran becomes criti-cal.
Norwegian gas export prices remain high. A substantial portion of Norwegian gas is still sold on long-term con-tracts where the price is linked to oil prices (see Chart 2.8). Moreover, spot prices for gas in Europe are relatively high, partly reflecting record-high gas prices in Asia.
Futures prices for oil and British gas indicate that Nor-wegian gas prices will also remain high ahead.
The Economist commodity-price index has risen by 6%
since the June Report. Food commodity prices are higher owing to prospects for poor harvests, particularly in the US but also in the countries surrounding the Black Sea.
Futures prices indicate that the increase may be tempo-rary (see Chart 2.9). The rise in prices for industrial met-als in early autumn reflects signmet-als of new expansionary measures in China and further central bank measures in the US, Japan and the euro area. Continued uncertainty surrounding economic developments have led to some decline in prices in recent weeks.
10 15 20 25
10 15 20 25
Chart 2.8 Prices for coal, crude oil and natural gas. USD per MMBTU.
Monthly figures. January 2003 – August 2015
Coal US¹⁾
Oil¹⁾
Gas UK¹⁾
Gas US¹⁾
Gas Russia Gas Norway
Futures prices
0 5 0
5
2003 2005 2007 2009 2011 2013 2015
1) For October 2012, calculated as daily average
Sources: IMF, Thomson Reuters, Statistics Norway and Norges Bank
300 400 500 600 700
300 400 500 600 700
Aluminium Copper Wheat Maize Soybeans
Chart 2.9 Commodity prices. USD. Index, January 2003 = 100.
Daily figures. January 2003 – December 2015
Futures prices
0 100 200
0 100 200
2003 2005 2007 2009 2011 2013 2015
Sources: CME Group, ICE and Thomson Reuters